January 31, 2012

Click here and here for some excellent links from Jesse at Cafe Americain. He has two great blues songs ready. Groovygirl loves the Blues, especially Robert Johnson!! Listening to Mr. Johnson sing the blues is like laying in a hammock on the front porch on a bright summer day watching a storm slowly roll in from a distance.

And you should be worried too. If any of your money goes thru a brokerage house at any time, it is now at risk.

Unlike the banking industry, where the Federal Deposit Insurance Corp. covers losses up to a limit for depositors, brokerage customers are at the mercy of the Securities Investor Protection Corp., an agency that’s been accused to being either slow to pay, unwilling to pay or both.

That’s why this isn’t just about a bunch of farmers, traders and institutional investors who are on the hook. It’s about the safety of the system — and by all appearances, nothing is safe.

If investors pull money from the brokerage industry, we will have another frozen liquidity problem but much worse than 2008. No liquidity means no credit for regular business activity.

groovygirl says:

The three posts today illustrate exactly how and when the global debt collapse will happen and how it will affect you and your investments. Reread the blog posts.

Jim states in his interview that the ISDA (controlled by the five big US banks, who also hold over 90% of the European debt credit swaps) determines if x% cut on Greece’s debt is technically considered a default. To continue to bury the truth and kick the can down the road, they will not consider it a default, no matter what the percent. But when will Mr. Market not listen to them, consider a default of any % a real default and call in the insurance/hedge? There is no money for the hedge. It is papered over in an emergency and covered in flexible accounting practices on the balance sheets.

This is exactly what happened to MF Global. They got called on their bets of Greek debt in a 50% haircut, not official default. The swaps were called in, but there was no insurance to cover the bets because it was not an official default. The only money in MF Global to cover a part of the bet was customer money. This money was stolen from pension funds, investors, non-big banks, and hedge funds to cover the other side of bets at the Big Five (in this case mainly JPM and GS). The customers will never see that money again.

As the European debt defaults, regardless of whether they call it a default or not, the bets will slowly be called in. The Big Five Banks will be covered by QE to infinity, but what about the other MF Globals out there? The small investors? The pension funds? Their money will be stolen just like the MF Global situation. MF Global was a test crime for the really big heist coming down the road.

Now I suspect that the Fed can paper over these losing bets for a while with only smaller entities going under. But when Martin Armstrong’s Economic Model calls for a peak on October 1, 2015 and this is also a peak year in the panic cycle, groovygirl would say QE can’t paper over the problem past 2015.

It is all right there. Exactly how it will happen and how QE will continue until it can’t anymore and how the Big Five Banks will be the only ones standing with everyone else’s money.

Am I saying that the entire US brokerage industry will be wiped out? No. Can we know which ones before hand? I don’t know. This is a new risk that no one is talking about. How can you protect your investments moving forward?

If you have to use a brokerage house, no rehypoteacation, hold only paper stock certificates. Have physical gold and silver outside the brokerage trading system and the banking system. Hold treasuries through treasurydirect, not a broker. If you trade, understand you may lose that money, make it a small part of your total investments. It is NOT insured and the system is now set up to steal it from you under the guise of the Global Debt Crisis and Collapse.

The scenario above is separate from any devaluation or revaluation of the US dollar and a loss of purchasing power. What is listed above is the risk to investments touched by the brokerage industry strictly from the implosion of debt, specifically Europe.

Click here for Martin Armstrong’s latest release entitled Sovereign Debt Crisis: When? dated January 30, 2012 (3 pages). He has a chart of the Economic Confidence Model on page 2. Mr. Armstrong still sees 2015 as the key year for thing to get really dicey.

Click here for a very important interview from Jim Sinclair. Media blackout on final swaps arrangement of Greece of the Big Five US Banks. VERY IMPORTANT, LISTEN TWICE.

ISDA will declare a default not a default. It seems this will be the blueprint for the future “defaults” of European country. This is how MF Global went broke, because a default was not a default, so insurance/hedge didn’t kick in. Who will be next? Will it be this time around? Next “default”?

More liquidity coming, QE to infinity. Benefit to equities and gold, bad for dollar. At some point, the default will have to be called a default and the insurance/hedge will be called in, but there will be no money. We just got closer to the end game.